SNC-Lavalin’s new CEO shakes up management ranks

SNC-Lavalin CEO Robert Card shakes up management

MONTREAL — SNC-Lavalin Group Inc. is shaking up its management ranks and shifting significant executive decision-making power to the United Kingdom as the Quebec engineering giant reshapes its strategy amid continued allegations of corruption.

Three months into the job after the sudden departure of his predecessor, SNC chief executive officer Robert Card is hiring industry veteran Neil Bruce to lead a new overseas business unit based in London called “resources and environment.” Mr. Card is also creating another unit to oversee the globalization of the company’s operations, naming the head of SNC Europe, Christian Jacqui, to steer it — also out of London.

The moves come just weeks after Mr. Card said he intended to deploy more of SNC’s top bosses abroad in the future as the Montreal-headquartered firm executes an effort to become a more “global company.” He has said there’s a big opportunity for SNC to extend further internationally and develop into a true multinational like Coca-Cola Co. or General Electric Co., whose overseas bases have so much high-level executive authority they’re seen as local.

“There is a spreading of power around the globe [going on here],” said AltaCorp Capital analyst Maxim Sytchev. “But the world is global right now. You have to be where your clients are. This is just being able to tap into a highly experienced, extremely credible executive who is based in London and who has the relationships there.”

Mr. Bruce’s unit will be the biggest unit within SNC, encompassing the company’s current hydrocarbons and chemicals business as well as mining, environment and water. With activities in most of the 100 countries in which SNC does business, the unit generates an estimated 38% of all its revenue.

Mr. Bruce is a 30-year energy and mining veteran who most recently worked for British-based project management consultancy Amec plc. In a sign of how well Mr. Bruce is regarded, shares in Amec fell 2.4% the day the company announced his departure.

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Desjardins Securities analyst Pierre Lacroix said the hiring of Mr. Bruce, and his appointment to SNC’s senior 13-member office of the president, is significant and could help SNC develop its oil and gas business in particular. The company last summer won a contract by Norwegian oil giant Statoil ASA for a 20,000-tonne underwater structure to support its Bressay North Sea oil drilling site. It wants more such wins to bolster its backlog in a business that still only represents about 16% of overall revenues and in which margins have swung wildly from quarter to quarter in recent years.

As part of the management changes, Mr. Card is also giving Montreal-based executive Michael Novak new responsibilities as executive vice-president for global government, aboriginal and economic affairs. The role is key as the company seeks to reassure municipal and state lawmakers, who represent some of its largest clients, that it has its ethics problems under control.

SNC-Lavalin has for more than a year been ensnared in allegations of corporate misconduct that has pounded its market value and public reputation. Last spring, it disclosed the results of an internal probe into $56-million in undocumented payments to commercial agents and dismissed former CEO Pierre Duhaime for approving the monies. The executive who allegedly requested the payments, former head of construction Riadh Ben Aissa, was also asked to resign.

Mr. Duhaime has since been arrested by Quebec’s anti-corruption police squad and arrested on charges of fraud, conspiracy to commit fraud and using forged documents related to SNC’s contract to build and maintain the McGill University Health Centre’s $1.3-billion superhospital in Montreal. Mr. Ben Aissa faces the same charges.

None of the allegations has been proven in court. SNC has been cooperating with police and has strengthened its business procedures, including hiring an outside consultant to run a 24-hour ethics and compliance hotline.

Though the fallout from the police investigations continues, the company has nevertheless managed to keep winning new business. It has spent millions on a special compensation program to retain employees so it can properly execute existing contracts.

Friday’s announced changes also include the departure of Patrick Lamarre, SNC’s current head of global power and son of former CEO Jacques Lamarre. He will be replaced on an interim basis by Scott Thon, the current president of the company’s Altalink subsidiary.

It appears evident that SNC’s CEO is adding management bench strength with an eye to future merger and acquisitions activity, said Canaccord Genuity analyst Yuri Lynk, noting that both Mr. Card and Mr. Bruce have a “penchant” for M&A. The analyst expects SNC to do some deal-making in the oil and gas space but nothing of significant size in the near-term.

What additional strategic changes Mr. Card has in store for SNC remains to be seen.

Much of the company’s value currently lies in its infrastructure concessions business, namely stakes in some 17 hard-asset investments including Toronto’s Highway 407 toll road, Calgary-based power distributor Altalink, and Paris’s Vatry cargo airport. Former chief financial officer, Gilles Laramée, now leads a business unit that oversees concessions.

SNC in November hired outside advisors to help examine those concession investments. Analysts believe SNC could be exploring whether to sell certain concession investments it considers non-core.

Its other holdings include full ownership of the William Bennett Bridge on Okanagan Lake, B.C. and a 36.9% stake in India’s 189-km REPL toll road.

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